5 C’s of Credit

The five C’s of credit are criteria that a lender will assess for an individual before they grant them a loan. It is important that you are aware of these criteria, as some of these are within your own control to manage which in turn will make you a better borrower in the future.


This is essentially a summary of the individual. Creditors look for people who appear to be trustworthy and reliable, and who are willing and able to meet their financial obligations.


This is the individual’s ability to repay the loan; it is based on present and anticipated earnings judged against existing debts.


T his applies for secured loans. The item pledged by the borrower as security for the loan, which may be savings, a property etc. Unsecured loans will not have collateral pledged against them.


Both regulatory and economic conditions are considered under this heading. Regulatory conditions apply to the lenders individual circumstances e.g. if a bank is carrying a lot of debt, they may be restricted in the amount of money which they can lend. Economic conditions determine the lender’s general policy towards lending – for example, in a recession, the financial institution might be worried about people losing their jobs and thus getting into difficulty in repaying debt. Both are affected by the current economic cycle.

Credit History

This is the individual’s track record of borrowing and repaying money. A person’s history in repaying a debt would play a big role in the lender forming an opinion as to whether a new loan will be repaid. For a first time borrower, the lender might look to see if they have a track record of saving which would give an indication of their ability (and discipline) to repay a loan.